Let Me Retire to My Fainting Couch

It appears that private equity and hedge fund types are getting hammered by interest rate increases.

I'm stunned.  I would have thought that with their exceptional financial brains, they would have taken actions to account for the rate hikes, and made even more money.

Does this mean that these are just ordinary and not particularly bright finance boys who have been overselling their allegedly mad skills?

Well knock me over with an LGM-118 Peacekeeper missile:

When Wall Street money managers fall from grace, there's usually some kind of discernible ruckus: the wail of angry investors, the steady drone of thousands of lawyers filing cases, and the rush of doomer headlines in the financial press. But even as some of Wall Street's elite are getting decimated, you can barely hear a sound.

In the post-financial-crisis world of zero interest rates, private equity — a clubby world of investment firms that use leverage (as well as some equity) to purchase portfolio companies — was one of the few places on Wall Street that guaranteed investors yield. But after that decade of winning, the industry's fortunes have started to turn — though you probably won't hear too much about it.

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In recent years, both the market and American society have turned on private equity. Rising interest rates have thrown a wrench in PE's debt-laden business model. Meanwhile, regulators are starting to view PE's practices as anticompetitive and antisocial. In a post-COVID, pro-reshoring world, PE's ethos of efficiency is giving way to a reclamation of the redundant — a recognition that even if it's more expensive, having extra capacity in the economy benefits competition, public health, and national security. 

What, we are no longer worshiping them as the Randian Ubermenchen that they think that they are?

Merciful heavens!

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Even the biggest players have various reasons to worry. Over at Carlyle Group, distributable earnings — profits that can be returned to shareholders — fell to $367.4 million in the third quarter, down 43% from the same time last year. At KKR, distributable earnings in the third quarter were down 6.6% compared to the same time the year before, much better than the 23% year-on-year drop the firm reported in the second quarter. This summer, the ratings agency Moody's downgraded Blackstone, Apollo, and KKR because of their large commercial real-estate holdings (only 66% of US workers have returned to the office full time, most reports indicate).

I know, I'll react like this This is such a tragedy, how should I react to this?

Please, won't someone think of their the PE bankers cocaine dealers?

Think of the coke dealers, and the hookers, and the interns.

THINK OF THE INTERNS!!!!